How Community Banks Can Compete in Mobile

Mobile services have helped to further reduce operating costs by migrating transactions to lower-cost channels while also enhancing the customer experience.

Banks continue to face a difficult operating environment, amid a sluggish economic recovery, compressed margins, onerous regulatory requirements, and looming disruptions from nontraditional market entrants. Most banks have taken steps to address near-term financial pressures, such as pricing adjustments or operating cost reductions (including branch closures). Additionally, over the past few years, those banks with the resources have also invested in a broad range of digital (online and mobile) services. These services have helped to further reduce operating costs by migrating transactions to lower-cost channels while also enhancing the customer experience. Customers, in return, have rewarded these digitally-enabled banks with increased market share.

Small and mid-size banks have struggled to keep up with this trend. As many seem to lag behind their larger, better-funded competitors in offering mobile banking services, they continue to experience customer attrition and market-share loss. But, as technology options continue to multiply and evolve, and the cost of implementation continues to fall, smaller banks have a unique opportunity not only to get back in the game, but also to leverage their distinctive strengths to beat the larger first-movers. The time has come for these banks to step off the sidelines and regain market share by offering a set of differentiated mobile services to consumers.

First, regional and community banks know their customers better than anyone else.

Using their own rich trove of customer data and their uniquely strong relationships in the local and regional merchant and civic communities, regional and community banks can deliver personalized shopping offers directly to customers’ mobile devices. Many other companies outside of financial services have successfully deployed mobile platforms; banks can follow these examples of using effective mobile app design and user interface elements, such as rich media, entertainment or gaming, to offer customers compelling and personalized experiences.

Banks are no longer forced to default to adding a mobile extension to their existing core banking platform. Although conventional wisdom says that integrating technology components from different sources typically increases complexity and time to market, integration partners and mobile development companies with specific competencies in mobile app development, mobile web design, service creation, and system integration are now able to minimize these risks.

Working with partners, banks can now strike the right balance between unique, differentiated services and the cost and complexity of development and deployment.

Third, the investment required to create and deliver mobile capabilities has shrunk considerably.

Institutions that led the creation of mobile services a few years ago had to invest heavily in developing applications from the ground up. Today, platform components as well as development and integration services are widely available at much lower cost. Cloud-based or hosted (mobile as a service) models have reduced the cost of delivery, leading to low capital investment and variable operating cost models. In short, current generation entrants can now leapfrog earlier, deeper-pocketed players on budgets that are affordable to small and mid-sized banks.

Small and mid-sized banks have a unique opportunity to benefit from the change in how customers interact with their banks by leveraging their unique relationships with their customers and their communities. Mobile technology gives these banks the ability to reconnect in more meaningful ways with their customers, build longer-term relationships and customer loyalty, and regain lost market share.

Seth Rosensweig is a managing director and Ari Roy is a director at AlixPartners